Introduction
Compliance isn’t the exciting part of running a business, but it’s the foundation that keeps you operating legally and avoiding costly penalties. Last year, small businesses paid over $15 billion in compliance-related fines, with the average penalty exceeding $14,000—often enough to sink a small operation.
The good news? Most compliance failures are entirely preventable with proper systems and knowledge. After helping thousands of businesses maintain compliance across all 50 states, we’ve compiled the essential tips that will keep you on the right side of regulations and out of legal trouble.
Create a Compliance Calendar
The number one reason businesses fall out of compliance? Missing deadlines. Your compliance calendar should include:
Annual Requirements
- Corporate/LLC Annual Reports: Due dates vary by state
- Business license renewals: Often annual, sometimes biennial
- Fictitious name renewals: Every 5-10 years typically
- Registered agent renewal: Annual in most states
- Professional license renewals: Varies by profession
Tax Deadlines
- March 15: S-Corp and partnership returns (Form 1120S, 1065)
- April 15: C-Corp returns, personal returns, first quarter estimates
- June 15: Second quarter estimated taxes
- September 15: Third quarter estimated taxes, extended corporate returns
- October 15: Extended personal returns
- January 15: Fourth quarter estimated taxes
- January 31: W-2s and 1099s to recipients, payroll tax returns
Quarterly Requirements
- Payroll tax deposits and returns
- Sales tax returns (some states monthly)
- Estimated tax payments
- Workers’ compensation reports
Pro Tip: Set reminders 30 days before each deadline. Better yet, use our compliance management service that handles everything automatically.
Maintain Corporate Formalities
Protecting your limited liability requires maintaining separation between you and your business:
For LLCs
- Keep Operating Agreement updated
- Hold annual member meetings (if required)
- Document major decisions
- Maintain separate bank accounts
- File annual reports
For Corporations
- Hold annual shareholder meetings
- Conduct regular board meetings
- Keep meeting minutes
- Issue stock certificates
- Maintain stock ledger
- Update bylaws as needed
- File annual reports
Documentation Checklist:
- Meeting minutes template
- Written resolutions for major decisions
- Unanimous written consent forms
- Records of all equity transactions
Stay Current with Business Licenses
Federal Licenses
Most businesses don’t need federal licenses, but exceptions include:
- Alcohol manufacturing or sales (TTB)
- Firearms sales (ATF)
- Broadcasting (FCC)
- Investment advising (SEC)
- Interstate transportation (DOT)
State Licenses
Common state-level requirements:
- Professional licenses (contractors, real estate, healthcare)
- Sales tax permit
- Employer registration
- Industry-specific permits
Local Licenses
Don’t forget city and county requirements:
- General business license
- Home occupation permit
- Signage permits
- Health permits (food service)
- Fire department permits
- Zoning compliance
Compliance Hack: Many cities offer a “business license wizard” on their websites—use it to identify all requirements.
Manage Tax Compliance
Federal Tax Requirements
EIN Obligations:
- Required for all businesses with employees
- Needed for business bank accounts
- Must update IRS if business structure changes
Income Tax:
- Choose correct tax year (calendar vs. fiscal)
- Make quarterly estimated payments if no withholding
- File correct forms based on structure:
- Sole Prop: Schedule C
- Partnership: Form 1065
- LLC: Depends on election
- S-Corp: Form 1120S
- C-Corp: Form 1120
State Tax Compliance
Common State Taxes:
- Income tax (not all states)
- Franchise tax
- Gross receipts tax
- Sales and use tax
- Payroll tax
Multi-State Compliance: If you operate in multiple states, watch for:
- Nexus triggers (physical and economic)
- Foreign qualification requirements
- State tax registration
- Apportionment rules
Sales Tax Essentials
Registration Requirements:
- Register before first sale
- Understand nexus rules post-Wayfair
- Know what’s taxable in your state
- Understand exemptions
Collection Best Practices:
- Use automated tax software for online sales
- Keep exemption certificates on file
- Separate tax collected from revenue
- File returns on time, even if no tax due
Employment Law Compliance
Before Hiring Your First Employee
Required Registrations:
- Federal and state employer ID numbers
- State unemployment insurance
- Workers’ compensation insurance
- New hire reporting system
Required Postings: Federal and state labor law posters including:
- Minimum wage
- Anti-discrimination laws
- Safety regulations
- Family leave rights
- Workers’ compensation
Ongoing Employment Compliance
Payroll Requirements:
- Classify workers correctly (employee vs. contractor)
- Withhold and deposit payroll taxes
- File quarterly 941 returns
- Provide pay stubs (required in most states)
- Maintain I-9 forms for all employees
Record Keeping:
- Employment applications (1 year)
- Payroll records (4 years)
- I-9 forms (3 years after hire or 1 year after termination)
- Tax records (7 years)
- Safety records (5 years)
Data Privacy and Security
Customer Data Protection
Basic Requirements:
- Privacy policy on website
- Secure payment processing (PCI compliance)
- SSL certificate for website
- Secure storage of customer data
- Data breach response plan
Industry-Specific:
- HIPAA for healthcare
- GLBA for financial services
- COPPA for children’s data
- CCPA/GDPR for California/EU residents
Cybersecurity Best Practices
- Use strong passwords and two-factor authentication
- Regular software updates
- Employee training on phishing
- Regular backups
- Incident response plan
- Cyber insurance
Intellectual Property Protection
Protect Your Brand
- Trademark your business name and logo
- Register copyrights for original content
- File patents for inventions
- Use NDAs with employees and partners
- Monitor for infringement
Avoid Infringing Others
- Don’t use images without licenses
- Verify name availability before use
- Research patents before product development
- Use original content or licensed materials
- Respect software licenses
Record Keeping Requirements
Financial Records
Keep Forever:
- Formation documents
- Bylaws/Operating Agreement
- Board/member resolutions
- Stock/membership records
- Property records
Keep 7 Years:
- Tax returns and supporting documents
- Financial statements
- Bank statements
- Receipts and invoices
- Payroll records
Keep 3 Years:
- Employment tax records
- Contracts (after expiration)
- Insurance policies (after expiration)
Best Practices
- Digitize everything
- Use cloud storage with backup
- Organize by year and category
- Implement document retention policy
- Secure sensitive information
Common Compliance Mistakes and How to Avoid Them
Mistake 1: Commingling Funds
Problem: Using business account for personal expenses Solution: Separate accounts, reimburse properly, document everything
Mistake 2: Missing Annual Reports
Problem: State dissolves your business for non-compliance Solution: Calendar reminders, registered agent service, compliance software
Mistake 3: Worker Misclassification
Problem: IRS penalties, back taxes, lawsuits Solution: Use IRS guidelines, when in doubt classify as employee
Mistake 4: Ignoring Multi-State Requirements
Problem: Penalties for operating without authority Solution: Register in every state where you have nexus
Mistake 5: Inadequate Insurance
Problem: Personal liability for business claims Solution: General liability minimum, professional liability if applicable
Red Flags That Trigger Audits
- Large deductions relative to income
- 100% business use of vehicle
- Home office deduction abuse
- Excessive meals and entertainment
- Round numbers on tax returns
- Consistently showing losses
- Large cash transactions
- Independent contractor misclassification
Building a Compliance System
Step 1: Initial Audit
- List all current registrations
- Identify all compliance requirements
- Check current compliance status
- Note all deadlines
Step 2: Create Systems
- Set up compliance calendar
- Assign responsibilities
- Create checklists
- Implement reminder systems
Step 3: Regular Reviews
- Quarterly compliance check
- Annual comprehensive review
- Update for law changes
- Adjust for business changes
Step 4: Get Help
- Hire professionals for complex areas
- Use compliance software
- Join industry associations
- Subscribe to regulatory updates
State-Specific Compliance Hotspots
California
- LLC annual tax ($800 minimum)
- Aggressive employment laws
- Prop 65 warnings
- CCPA privacy requirements
New York
- LLC publication requirement
- New York City additional taxes
- Aggressive sales tax enforcement
- Paid family leave requirements
Texas
- Franchise tax complications
- No state income tax benefits
- Strong property rights
- Business-friendly regulations
Delaware
- Franchise tax surprise for corporations
- Registered agent requirement
- Annual report simplicity
- Business court advantages
Conclusion
Compliance doesn’t have to be overwhelming. With proper systems, regular attention, and professional help when needed, you can maintain full compliance without it consuming your business life. The key is being proactive rather than reactive—preventing problems is always cheaper than fixing them.
Remember: compliance is not a one-time event but an ongoing process. Laws change, your business evolves, and requirements shift. Stay informed, stay organized, and don’t hesitate to seek professional help when needed.
Worried about compliance? Norgaard Consulting’s Compliance Management Service handles all your ongoing requirements for one flat annual fee. Get a free compliance audit to identify any gaps in your current compliance.